Okay, this is supposed to be a blog. I have an opinion on SFAS 165 on subsequent events, transplanted from the auditing domain. But deep down in the opinion is a question…

So the new standard (my read) indicates that if information comes to the plate regarding an “event” that existed at the balance sheet date .. and that information helps with estimability of the amount booked at the balance sheet date, then one incorporates it into the estimate as of the year end.

Fine and dandy.

(Where’s my opinion, you ask? Keep reading.)

This standard (165, codification something or other)… is not very clear on what happens if estimability remains constant but the probability changes with something new coming to the plate during the period between end of year and the financial statement issuance. What if something changes the probability of occurence of the loss outcome in that time period, changing it from reasonably possible to probable? Or the other way around? From probable to reasonable possible?

The standard is clearer on examples that update the estimate of a contingency already booked. but what if that contingency is not already booked? Does it change recognition?? Could it change recognition .. to derecogntion? Are we in the same black box as in sfas 5 on this issue of derecognition??

The standard speaks in terms of “conditions that existed at the balance sheet date..” what is a condition, I ask??

Who has insight? I have an opinion (keeping with the blog)… my opinion is that i’m truly confused.

who has an answer. I’ve asked locally and gotten one strong opinion and one “yeah, i see your point.”